Friedrich Hayek, Central Planning, and Obamacare

I am not a libertarian who argues against the need for programs such as Medicare and Medicaid. But Friedrich Hayek has this much going for him: He understood that the challenge of technocratic planning is always limited information: “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

Which is why planning tends to fail, particularly in highly complex systems. “This is not a dispute about whether planning is to be done or not,” Hayek said. “It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.”

So maybe the problem is not Obama or Sebelius but rather a government program that requires superhuman technocratic mastery.

Gerson and Hayek are right on the central point here. Government can't effectively engineer highly complex systems, whether it's American health care or the political and cultural preferences of the Iraqi people. I would add two things.

First, the problem isn't just that the information is limited, but that much of the existing information is flawed. Take, for example, 47 million—the supposed number of Americans who don't have health insurance and one of the prime movers of the pro-Obamacare argument. The figure is a complete joke that includes illegal immigrants, those who are temporarily in between insurance plans, and those who can afford insurance but opt not to buy it. Yet it was cited repeatedly by Barack Obama, both on the campaign trail and as president (but I repeat myself). Government can't centrally plan based on data because so often the data derived from sociologists and economists are fleeting, fudged, or wildly politicized.

Second, there's an argument from principle here that goes beyond the data points. Let's assume that somehow government wonks could obtain perfect information to perfectly calculate perfect outcomes. That still doesn't mean we should let them do it. Obamacare, even if flawlessly implemented, mandates individuals to purchase pricey health insurance, even if they don't want it. It requires insurance companies to cover a suite of services, regardless of whether the policyholder needs them. It forces Catholics to violate their consciences and provide birth control via their insurance plans. The central planning necessitated by Obamacare isn't just impractical; it's immoral. The conservative argument should be not just that Obamacare won't work, but that's it's wrong at the most fundamental level.

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